Research Agencies Legislation Amendment Bill 2002

WARNING:
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Bill.

Passage History

Research Agencies Legislation Amendment
Bill 2002

Date Introduced:21 March 2002

House:House of Representatives

Portfolio:Education, Science and Training

Commencement:Royal Assent

Purpose

To amend the Australian Institute of Marine
Science Act 1972 and theAustralian Nuclear Science and Technology Organisation Act
1987 so as to make it easier for the Australian Institute of
Marine Science (AIMS) and the Australian Nuclear Science and
Technology Organisation (ANSTO) to pursue business opportunities
arising from their research and expertise.

In 1990 the Commonwealth Government set external
earnings targets for the three science agencies CSIRO, AIMS and
ANSTO.(1) The specific aim of the targets was to
encourage closer relations between the researchers, industry and
other potential users. It was foreseen that this would, among other
things, lead to the benefits arising from research being more
available to Australian industry. The external earnings targets are
negotiated by the three public sector research institutions in the
context of their Triennium Funding Agreements with the Government.
Recently, the Chief Scientist, Dr Robin Batterham, carried out a
review of the targets. His findings have not yet been
released.(2)

On 29 January 2001 the Prime Minister launched
the Government s innovation action plan entitled Backing
Australia s Ability. The plan is built around three
concepts:

strengthening Australia s ability to generate ideas and
undertake research

accelerating the commercial application of those ideas,
and

developing and retaining Australian skills.(3)

The innovation plan was generally well received
by the Australian science and research communities.(4) A
ministerial committee chaired by the Prime Minister has been set up
to oversee the implementation of the plan. Additional funding of
$2.9 billion is to be provided over a five-year period, with $159.4
million to be spent in the first year (2001-02), increasing to
$946.6 million in 2005-6. The plan requires business and research
institutions to spend $6 billion over the same period to attract
its grants and incentives.(5) Recent media reports
suggest that the innovation program is moving more slowly than
anticipated, and that one of the Government s challenges is to
encourage greater cooperation between industry and research
institutions. Without this, the Government may not achieve its goal
of adding $6 billion in additional private sector spending on
research and development during the five years of the innovation
plan.(6)

Backing Australia s Ability proposed a
number of initiatives for public sector research institutions,
including:

strengthening research links between public sector science and
industry bodies, and

providing seed-funding to take promising research to the stage
of commercial viability.

The amendments proposed by this Bill address the
issues of commercialising the research carried out by the
Australian Institute of Marine Science (AIMS) and the Australian
Nuclear Science and Technology Organisation (ANSTO). In his second
reading speech on this Bill, the Minister for Science, Hon Peter
McGauran, said that Backing Australia s Ability identified
the need to examine barriers to the commercialisation of government
funded research. As part of its work on this matter, the CSIRO,
AIMS and ANSTO acts were examined to ensure that they do not
inhibit the commercialisation of research developed by these
agencies. The Australian Government Solicitor found that both AIMS
s and ANSTO s legislation were most restrictive in this context,
imposing commercialisation restrictions. (7) The Bill
proposes to facilitate commercialisation by removing such
restrictions.

AIMS is a Commonwealth statutory authority
established by the Australian Institute of Marine Science Act
1972. Its mission is to generate the knowledge to support the
sustainable use and protection of the marine environment through
innovative, world-class scientific and technological research
.(8) AIMS was established by the Federal Government in
1972 in recognition of the growing importance of the marine sector
to Australia. Its first major laboratory was opened in 1977 at Cape
Ferguson, near Townsville. In 1995 the Institute opened a small
laboratory in Dampier, Western Australia, to provide a base for its
growing research program in north west Australia. This program was
established to support the conservation and management of the north
and west marine zones of Australia, an area that has high
conservation value and is rich in oil, gas, fisheries and minerals.
In 2000 the AIMS Council decided to close the Dampier facility and
disperse the resources between new facilities in Perth and Darwin.
It is anticipated that these moves will provide better contact with
clients requiring AIMS services.(9)

Currently AIMS research is based around five
projects that focus on:

predicting climate impacts on marine ecosystems

exploring and conserving marine biodiversity

sustaining marine living resources

measuring human impacts in coastal marine ecosystems, and

deriving benefits from marine biotechnology.
(10)

The clients of AIMS include industries
(fisheries, mining, petroleum and tourism), researchers and
educators, federal, state and local governments, and the Australian
community. Among the areas that AIMS has identified as research
priorities are the sustainable development of aquaculture
industries and exploitation of marine genetic resources for
pharmaceutical and commercial use. Marine research also contributes
to the planned management of Australia s coastal environments by
identifying and quantifying the impact of various human activities
(such as agricultural run-off, pesticides, oil freshwater
diversion, aquaculture effluents) on the ecology of coastal
habitats. According to its latest Annual Report, AIMS has
commissioned a small amount of market analysis related to the
potential commercialisation of its technologies(11) and
proposes to incorporate a company to take its shellfish toxin
detection technology to market in an appropriate commercial
alliance.(12) In 2000-2001 AIMS s external earnings
target was 20 per cent of total revenue adjusted for unrelated
revenue. It raised $4.4 million in external earnings in the year
ending 30 June 2001.(13)

ANSTO is Australia s national nuclear research
and development organisation. It was established by the
Australian Nuclear Science and Technology Organisation Act
1987. ANSTO has a staff of approximately 800 and is located at
the Lucas Heights Science and Technology Centre, in southern
Sydney. The science and technology centre occupies 70 hectares and
is surrounded by a 1.6 km buffer zone. ANSTO operates Australia s
only nuclear reactor. The reactor is used to produce radioactive
products for use in medicine and industry. It is also used
extensively as a source of neutron beams for scientific research
and to irradiate silicon for semiconductor
applications.(14) According to the Minister for Science,
Hon Peter McGauran, each year almost half a million Australians
depend on a nuclear medicine procedure using reactor-derived
isotopes.(15)

A licence to construct the replacement research
reactor at Lucas Heights was issued by the nuclear regulating
authority (ARPANSA) on 5 April 2002.(16) In July 2000
the contract to construct the replacement reactor was awarded to an
Argentine company, INVAP, working with an Australian joint venture
subcontractor comprising John Holland Construction and Engineering,
and Evans Deakin Industries.(17) It is expected that the
replacement reactor will be in operation by 2005. Sites for the
storage of low level and intermediate level radioactive waste from
the reactor have yet to be determined.(18) Greenpeace
has challenged the granting of the construction licence in the
Federal Court, saying that there are serious problems with ANSTO s
nuclear waste management. On 17 April 2002 the Federal Court
granted Greenpeace an expedited hearing for May
2002.(19)

ANSTO advises the Commonwealth Government on
issues associated with the nuclear fuel cycle and the operation of
nuclear facilities. It also supports industry through the
development and application of nuclear science based technology and
associated capabilities. ANSTO s mission statement consists of four
components, one of them being to apply technologies [resulting from
research] and other relevant, unique capabilities to focussed
research and development and other scientific activities to
increase the competitiveness of Australian industry and improve the
quality of life for all Australians. (20)

The principal source of ANSTO s funding is
parliamentary appropriations. In 2000-2001 ANSTO generated $35.8
million from external services (up from $32.2 million in
1999-2000), representing 29.5 per cent of total income (the
external earning target was 20 per cent). Despite this, the
operating result for ANSTO in 2000-2001 was a $5.3 million deficit.
According to the Chairman s Report for 2000-2001, the deficit was
an outcome of ANSTO s limited ability to respond to decreasing
parliamentary appropriations and various new government charges,
while maintaining the operation of facility safety and the core
competencies of the organisation.(21) ANSTO s response
to these funding difficulties was to increase external earnings,
improve efficiencies and reduce expenditure on research and
development.(22) The Government has agreed that ANSTO
should receive additional funding to cover the increased costs
associated with regulation, that backlog maintenance funding be
provided for three years, and that there be no further cuts to
ANSTO s research funding.(23)

ANSTO has a range of commercial activities.

It leases some of its property at the ANSTO Technology Park to
high technology companies and public sector
organisations.(24)It earned
$2.3 million from land management in 2000-2001.(25)

In 2000-2001 sales of radiopharmaceuticals and radioisotopes
for medical, industrial and research purposes earned $17.99
million. Export sales grew by 19 per cent to $2.5 million to make
up 14.2 per cent of total revenue from these
products.(26)

In July 2000 an ANSTO business unit called Sulfide Solutions
was established to derive value from ANSTO s previous research
efforts in the Managing Mine Wastes Project.(27)

Main
Provisions

The proposed amendments to the AIMS Act are in
three parts. Part 1 makes amendments to the function and powers of
AIMS, Part 2 amends the finance provisions of the AIMS Act and Part
3 makes a number of miscellaneous amendments that have the effect
of providing AIMS with greater flexibility in its operations.

Item 1 inserts a definition of
application and use in section 5. The expression is intended to be
interpreted broadly and, in particular to mean non-marine as well
as marine application and use.

Subsection 9(1) of the AIMS Act deals with the
functions of the Institute. Items 2 and 3 repeal
paragraphs 9(1)(a) and (f) and substitute new paragraphs that will
have the effect of allowing AIMS to carry out research and
development (proposed new paragraph 9(1)(a)), and
to collect and disseminate information (proposed new
paragraph 9(1)(f)), relating to both marine science and
marine technology and the application and use of marine science and
marine technology.

The effect of item 4 is to
ensure that AIMS is able to produce and sell goods and provide
services in connection with the application and use of marine
science and marine technology.

Subsection 9(2) of the AIMS Act deals with the
purposes for which the Institute may carry out its functions.
Item 6 provides that AIMS may perform its
functions to the extent that they do not exceed the functions
conferred on it by Parliament through legislation. Items 7
and 8 add proposed new paragraphs 9(2)(g), (h) and
(i) and provide AIMS with additional purposes for carrying
out its functions. Item 8 inserts a catch all
provision to include purposes such as quarantine, fisheries in
Australian waters beyond territorial limits, and telecommunications
for the purposes of section 9 of the AIMS Act.

Item 10 provides that the
Institute may display material and give lectures to the general
public and others, about both marine science and marine technology
and the application and use of marine science and marine
technology.

Items 12-14 add new definitions
of associated company , borrowings and Finance Minister to section
5. An associated company is defined as one in which AIMS controls
15 per cent or more of the maximum number of votes that might be
cast at a general meeting of the company.

Item 15 inserts
proposed new paragraph 10(2)(ha) which provides
that, in performing its functions, AIMS may lend money to its
associated companies. Proposed new paragraph
10(2)(hb) provides that AIMS may, in performing its
functions and with the written approval of the Finance Minister,
also provide guarantees for the benefit of its associated
companies. The purpose of these proposed amendments is to give AIMS
and its associated companies the power to borrow money to finance
their commercial activities, and to give AIMS the ability to make
and guarantee loans to its associated companies.

It is interesting to compare this with the
corresponding provisions in the CSIRO s enabling legislation, the
Science and Research Industry Act 1949 (CSIRO Act). The
functions and powers of CSIRO are set out in sections 9 and 9AA of
the CSIRO Act. Under this Act, CSIRO may join in the formation of a
partnership or company but may not, without the written approval of
the Minister, hold a controlling interest in a company. If the
Minister approves and CSIRO commences to hold a controlling
interest in a company, then the Minister must table in each House
of Parliament within 15 sitting days, a statement setting out the
particulars of, and the reasons for, the holding of that
controlling interest. In addition, where CSIRO holds a controlling
interest in a company, the Organisation must ensure that the
company does not do any act that is outside the functions of the
Organisation. Similar provisions are not provided in the
legislation governing AIMS (or ANSTO).

At present AIMS must seek the approval of the
Minister before it enters into a contract which involves payment by
the Institute of an amount exceeding $100,000. Item
20 raises this limit to $1 million, or a higher amount if
a higher amount is specified in regulations. One effect of this
proposed amendment is to delegate the power to limit a financial
commitment by AIMS to the executive. This is similar to the
provisions in the CSIRO Act where a contract value threshold higher
than the $250,000 that is prescribed in section 50 of the Act, may
be prescribed in regulations.

borrow from persons other than the Commonwealth with the
written approval of the Finance Minister. The money may be borrowed
wholly or partly in foreign currency (proposed new section
42B)

obtain Commonwealth guarantees from the Finance Minister for
borrowings made by the Institute (proposed new section
42C). Under proposed new subsection
42C(2), the Finance Minister may determine in writing that
AIMS s borrowings under section 42B are guaranteed by the
Commonwealth

give security over the whole or part of the Institute s assets
for any borrowings made under section 42A or 42B, or guarantee
under section 42C (proposed new section 42E).

Item 22 affirms that stamp duty
exemptions apply to AIMS in relation to its borrowings.

The effect of these amendments is that AIMS will
have more flexibility to act like a private sector company, while
retaining its exemptions from stamp duty and having its debts
guaranteed by the Commonwealth.

Items 24-28 remove the
requirement for the Director or Acting Director of AIMS or any
staff member, whether full-time, temporary or casual, to take an
oath or affirmation of allegiance before starting employment with
the research institution. Item 31 removes the
Schedule which set out the form of the oath or affirmation that was
formerly required. These amendments are in line with the Public
Service Act 1999 which no longer requires APS employees to
make an oath or affirmation of allegiance.(28)

At present the Minister must approve the terms
and conditions under which AIMS may make available any discovery,
invention or improvement of any process, apparatus or machine made
by an officer or employee of the Institute in the course of his or
her official duties. Item 29 removes this
requirement giving the management of AIMS greater flexibility to
determine its own terms and conditions. Item 30
removes the requirement for Ministerial approval for bonuses that
Council may pay officers, employees or persons working on behalf of
AIMS for useful discoveries or inventions made by them.

By way of contrast, section 54 of the CSIRO Act
dealing with inventions etc. by officers provides that

A discovery, invention or improvement of or in any process,
apparatus or machine made by an officer of the Organisation in the
course of the officer s official duties is the property of the
Organisation.

An officer of the Organisation shall not, except with the
consent in writing of the Chief Executive, make application for a
patent for an invention that is made by the officer in the course
of the officer s official duties or that relates to any matter or
work connected with the officer s official duties.

In addition, the CSIRO Act still requires
ministerial approval before the Organisation can pay bonuses to
officers or people working on behalf of the CSIRO, for discoveries
or inventions made by them (paragraph 9AA(1)(d) of the CSIRO
Act).

The amendments to the ANSTO Act are in two
parts. Part 1 amends some of the functions and powers of ANSTO to
allow the Organisation to engage in a range of commercial
activities, and Part 2 increases the financial limit on contracts
that ANSTO may enter into without ministerial approval.

Item 1 adds a definition of
application and use for the purposes of the ANSTO Act. This allows
ANSTO to apply and use non-nuclear as well as nuclear science and
technology. Items 2 and 3 add the application and
use of nuclear science and nuclear technology as a function of the
Organisation. The effect of items 7 and 8 is to
clarify that ANSTO can produce and acquire goods, as well as
providing and selling goods and providing services in connection
with nuclear science and nuclear technology or the application and
use of nuclear science and nuclear technology.

Paragraph 5(1)(ea) provides that one of ANSTO s
functions is to make available to other persons, on a commercial
basis, the knowledge, expertise, equipment, facilities [resources
and property] of the Organisation by

providing training and management expertise; or

selling or leasing equipment; or

leasing land [, buildings] and facilities; or

taking any other action that the Organisation thinks
appropriate.

Paragraph 5(1)(ea) is amended by items
11 and 12 to add resources and property , and buildings to
the list of things that ANSTO may make available on a commercial
basis.

The effect of item 14 is to
clarify ANSTO s ability to construct and lease buildings to third
parties.

At present ANSTO must seek the approval of the
Minister before it enters into a contract which involves payment by
the Organisation of an amount exceeding $5 million. Item
16 does not increase the amount but provides that
regulations may specify a higher amount. This is similar to the
change made to the AIMS Act by item 20, and brings
ANSTO in line with CSIRO where section 50 of the CSIRO Act provides
that regulations can prescribe a higher contract value threshold
than that prescribed in the Act before Ministerial approval is
needed.

The effect of the amendments proposed by this
Bill is to provide AIMS and ANSTO with a greater degree of
independence from ministerial direction. Nevertheless both
statutory bodies will continue to be subject to government control
and supervision by way of their own enabling legislation and the
provisions of the Commonwealth Authorities and Companies Act
1997 (CAC Act). The Bill does not alter the situation that the
principal source of funding for both AIMS and ANSTO will continue
to be parliamentary appropriations. External earnings at present
make up about 20 30 per cent of each agency s budget and setting an
external earnings target is part of the negotiations for each
agency s Triennial Funding Plan. AIMS is given the power to borrow
money from lenders with the approval of the Finance Minister. There
are provisions for the Commonwealth to guarantee these loans.

AIMS and ANSTO will continue to be accountable
to Parliament through their responsible Minister. Accountability of
the two public sector research institutions is provided through the
preparation of a corporate plan, annual report and indicators of
financial and non-financial performance as well as external audit.
The content of AIMS s and ANSTO s annual reports, including their
financial statements will continue to be governed by Schedule 1 of
the CAC Act and Orders made under the CAC Act.

Australian Institute of Marine Science, Annual Report
2000-2001, p. 84. Also Hon Barry Jones, Minister for Science,
Customs and Small Business and Minister assisting the Prime
Minister for Science and Technology, Science and Technology:
Ministerial Statement , House of Representatives, Debates,
8 May 1989, p. 2108.

Press reports on the review of the external earning targets
include The science of finding money by Cheryl Jones,
Australian Financial Review, 8 January 2002; Season of
change in measuring research , by Simon Grose, Canberra
Times, 23 January 2002; Research funding targets may be
abolished , by Simon Grose, Canberra Times, 14 February
2002.

Backing Australia s Ability: an innovation action plan for
the future, Canberra, 2001. Available at
http://www.innovation.gov.au/iap/Info_Pack/backing_Aust_ability.pdf

Australian Institute of Marine Science, Annual Report
2000-2001. Available at www.aims.gov.au

op cit, p. 2.

Australian Institute of Marine Science, Research Plan
2000-2003. Available at www.aims.gov.au

ibid., p. 48.

ibid., p. 25.

ibid., p. 85. AIMS s external earning target has varied over
time. In 1990-1991 the AIMS Annual Report stated that the
external earning target had been set by the then government at 25
per cent from July 1990 and 30 per cent of total appropriation from
July 1991. In 1990-1991 AIMS raised 24 per cent of its total
appropriation from external earnings. In 1999 AIMS s external
earnings ratio was 23 per cent. This fell to 20 per cent in 2000
and 2001. (AIMS Annual Report 2000-2001, p. 84).

to provide expert scientific and technical advice across the
nuclear fuel cycle to government and to support Australia s
national strategic and nuclear policy objectives

to operate large nuclear science and technology based
facilities in Australia and overseas for the benefit of industry
and the Australian research and development community, including
postgraduate students and staff in higher education

to undertake research on specific topics to advance the
understanding of nuclear science and the nuclear fuel cycle

to apply resulting technologies and other relevant, unique
capabilities to focussed research and development and other
scientific activities to increase the competitiveness of Australian
industry and improve the quality of life for all Australians

Rosemary Bell
20 May 2002
Bills Digest Service
Information and Research Services

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